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Plans to Increase Coal, Oil Royalty Payments Expected

Turn to the nation's most objective and informative
daily environmental news resource to learn how the United States and key
players around the world are responding to the environmental...

By Ari Natter

Jan. 13 — The Obama
administration is expected to move forward with proposals that
would increase the royalty rates that coal and oil and gas
companies pay for the right to use federal land following the
president's State of the Union pledge to “accelerate the transition
away from dirty energy.”

“That's why I'm going to push to change the way we
manage our oil and coal reserves, so that they better reflect the
costs they impose on taxpayers and our planet,” Obama said during
his address.

While the White House hasn't provided any specifics,
environmental groups said his remarks are almost certainly a
reference to an ongoing fight over the Interior Department's coal
leasing program, which critics on and off Capitol Hill say is
leasing coal at below fair market value and doesn't take climate
change into account (211 ECR 211, 11/2/15).

Federal lands provide about 40 percent of U.S. coal
production, according to Sen. Maria Cantwell (D-Wash.), who has led
efforts to make changes to the program.

Calculating ‘True Costs.'

“I am pleased the president noted the need to
recalculate the true costs of federal coal and ensure that the
American taxpayer gets proper value for this resource,” Cantwell
said in a statement following Obama's address. “I've urged the
administration to reform the outdated, unbalanced coal leasing
program and I'll work with them to address the fact that coal off
of federal lands is a sweetheart deal and a taxpayer rip-off. We
must better account for carbon pollution here at home.”

Others who have called for changes to the Interior Department's coal program include the Center for American Progress and the New York University School of Law, which released a report in October that said the department should update its definition of “fair market value,” raise minimum bids and infuse coal market price into royalty calculations.

Interior to Finalize Rule on
Valuation

The Interior Department plans to finalize this year
a rule proposed in January 2015 by the Office of Natural Resources
Revenue that would modernize existing valuation regulations for
coal, oil and natural gas on public lands, Jessica Kershaw, a
spokeswoman for the Interior Department, told Bloomberg BNA (248
ECR, 12/29/14).

The department also has taken other action to
address criticisms of its coal program, including revising the
program's manual and handbooks “to increase clarity regarding how
the agency determines fair market value, provide guidance on
independent review of appraisal reports and make improvements that
will enable the [Bureau of Land Management] to account for export
potential through analysis of comparable sales and income,” Kershaw
said.

Oil, Gas Payments Could be
Increased

Separately, the Obama administration is considering
increasing royalty rates and other fees paid by oil and gas
companies using federal lands in the form of an advanced notice of
proposed rulemaking (RIN 1004 - AE41) issued by the Interior
Department in April (74 ECR, 4/17/15).

While many royalty rates are fixed by statute at
12.5 percent, Interior has the discretion to raise royalty rates
for competitive leases and questioned in the rule whether levels
were adequate to provide a fair return to taxpayers for the use of
public lands.

The role of climate in the government's management
of public fossil fuel resources has been a burgeoning issue that
could have implications for the already struggling coal industry
and an oil industry struggling to cope with plummeting oil
prices.

Climate Fight Ahead

“The issue of fossil fuel extraction on public lands
is going to be a key fight over the coming months,” May Boeve,
executive director of the environmental group 350.org, said in a
statement. “We welcome President Obama's full throated endorsement
of clean energy and his pledge to take a close look at how we can
get off fossil fuels. The President's top priority during his last
year in office needs to be keeping that coal, oil and gas in the
ground.”

“Undeniably, imposing more burdens on federal coal
production will yield less, not more, revenue to the federal, state
and local governments,” National Mining Association President and
Chief Executive Officer Hal Quinn said in a statement provided to
Bloomberg BNA. “All of these proposals are obvious proxies for
denying Americans the value of low-cost reliable energy and
high-wage jobs generated by coal.”

The Washington-based trade group represents
companies such as Arch Coal Inc. and Peabody Energy.

Bad Timing

“With the current low price environment and the
onslaught of regulations aimed at America's oil and natural gas
industry—an industry that has been widely credited with
revitalizing our economy—this president has gone out of his way to
dramatically increase the burdens on independent producers to
continue responsibly developing America's abundant energy resources
on our public lands,” Neal Kirby, a spokesman for the Independent
Petroleum Association of America, told Bloomberg BNA in an
e-mail.

“Now is the worst time to raise fees on America's
independent producers,” Kirby said. “Increasing operating fees and
adding layers of bureaucratic red tape during a time of market
volatility will not only shut down production on public lands it
will rob American taxpayers from much-needed tax breaks in the form
of additional revenue through royalties and other payments to the
U.S. Treasury.”

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